IaaS: What you need to know about pricing, options, best practices

The infrastructure-as-a-service market is booming, but it's not always easy to understand. Here are the basics to help you understand what's out there.
Written by Conner Forrest, Contributor
Image: iStockphoto/Wavebreakmedia

The explosion of cloud computing has shaken a lot of things up in the IT business world -- software sales models, delivery expectations, and security, to name a few. And, at the foundation of that revolution is the infrastructure-as-a-service layer (IaaS) -- the servers, storage, networks, and operating systems that make up your cloud service.

Despite its growing popularity, not every business is investing in the cloud just yet. But it's only a matter of time before they will. According to a Gartner research report, "By 2020, more compute power will have been sold by IaaS and PaaS cloud providers than sold and deployed into enterprise data centers."

Cloud ubiquity is coming, and it's coming fast -- driven in part by the massive growth of the IaaS market. That same Gartner report noted that the IaaS market has grown 40 percent in revenue per year, every year since 2011; the analyst firm predicts that it will keep growing, to a lesser degree, through 2019.

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If you're unclear how the IaaS market works and the nuances that go into the different options, never fear: here's a look at some of the basic differences in IaaS offerings and what goes into the pricing. This guide doesn't touch on individual prices, per se, but it will help you better understand the factors in play when choosing a deployment option.

The three core options

For starters, it's important to understand the three core options that are available in IaaS: public cloud, internal private cloud, and hosted private cloud. These are pretty well-known by now, but a quick refresher can't hurt.

The public cloud is hosted in an external provider's data center, with flexible per-hour, or sometimes even per-minute, pricing models.

Forrester Research's Lauren Nelson said that the public cloud is "designed to incentivize variable usage. So, if you use it every single hour of an entire month, every single hour of the year, you actually pay more than you would with an alternative model."

Additionally, Nelson said, there are new pricing options from many IaaS vendors -- called 'reserved instances' -- that reward customers for telling the vendor when they expect to have heavy usage, so the vendor can be prepared.

Within the public cloud, there are commodity cloud players and enterprise cloud players. The commodity cloud providers offer low-end infrastructure that is, essentially, built to fail, Nelson said. This is for workloads that can tolerate more risk in terms of performance and security.

"If something goes wrong with your server, your virtual machine, you don't spend time fixing it," Nelson said. "You just kill it , and then start a new instance."

As you've probably guessed, this option is a lot cheaper, but a lot of applications aren't usually built to handle that kind of failure. You need a very specific application architecture to be able to handle this failure, said Nelson. So, make sure your applications can quickly navigate among VMs if one goes down before courting this option.

Enterprise-class IaaS options are built with more stringent security and performance requirements in mind, but they are waning in popularity. The general success of the public cloud, Nelson said, is built on the commodity players. As such, growth in the commodity market is killing off the enterprise cloud market, and major providers like HPE and Verizon are exiting the space and rethinking their strategy.

SEE: AWS, Microsoft seen rated top dogs in IaaS in Gartner's Magic Quadrant

The private cloud, overall, is massively different than its public cousin. With internal private cloud, Nelson said, vendors sell software to try and bring aspects of public cloud into a company's on-premises data center. The key features of an internal private cloud are the added security it can bring and the self-service access developers have to get resources provisions for themselves in a matter of minutes.

The downsides of internal private cloud start with the price. The software is "incredibly expensive," said Nelson. Unlike the public cloud, resources are still being paid for even when they aren't being used. It also puts the burden of management onto the business's IT department if additional management capabilities aren't written into the contract. It makes things a bit faster, but it doesn't change much of the buying model for IT.

A hosted private cloud still comes from an external provider, but you get long-term negotiated pricing and other benefits.

"It allows you to have a three-to-five-year negotiated contract, but you still have a cloud provider serving up those resources," Nelson said. "So you don't have to have staff that responsible for learning how to become a cloud provider, you don't have to worry about incentives for your employees, because the provider does a lot of that themselves."

Essentially, your organization shoulders less responsibility for managing the private cloud.

Of course, hybrid cloud combines features from both public and private cloud deployment as an additional option. Outside of these core categories, there are a few other options that play into pricing and features -- namely management.

Managed versus unmanaged

Within the IaaS market, there are two distinct 'flavors' available that apply to both public and private cloud platforms: managed and unmanaged.

"Managed infrastructure-as-a-service is something where you get a subscription, you sign up, you have a support contract, you have folks on the service provider side that are actively engaged in supporting what you're doing in terms of utilizing that infrastructure and consuming it," said Carl Brooks of 451 Research. "And yet, you're still getting it, more or less, on demand."

Subscriptions are typically month-to-month, occasionally longer term. Customers get virtual machines, networking, and storage to consume as they wish, but with higher-level service. Example vendors, said Forrester's Nelson, would be HPE or RackSpace, which offer commodity public cloud plus their own managed services. Managed public cloud is still a relatively new option, but managed private cloud offerings are also available.

Unmanaged IaaS is what Brooks called "the pure public cloud experience," where enterprise IT goes out and builds and manages their cloud deployment with resources obtained from a vendor.

"When I say the IT organization goes out and does it itself, what I mean is that it usually hires an IT outsourcer or system integrator," said Brooks. Often, that's a professional services firm like Accenture or Deloitte. These companies are not cloud providers -- rather, they add services such as consulting and team training on top of another company's cloud, Nelson added.

In terms of pricing, all of the big names in public cloud (Microsoft Azure, AWS, Google Cloud Platform, IBM Softlayer) land toward the middle of the pack, said Brooks. However, that doesn't mean they are cheap.

"If we compare total cost of ownership over three years, if an enterprise went out and tried to build infrastructure comparable to what Amazon does -- just buying the servers, buying the storage, building it themselves," Brooks said, "over three years, it would cost them about one-third less than to do that than it would cost them to do on Amazon."

The highest prices are attached to additional consulting service providers and IT outsourcers, while the lowest prices are available to those who opt for more basic, unmanaged infrastructure options from companies like DigitalOcean or ProfitBricks. DigitalOcean's pricing, for example, starts at $5 a month.

In that sense, you are essentially paying for three things: convenience, service/support, and the ability to defer cost.

The convenience factor comes with someone else managing the system, but it pushes the cost up. Still, it can be nice to not have to invest a ton of money upfront for a big cloud project, as you don't have to pay to build out the infrastructure yourself.

SEE: IaaS demand soars: Why this is great news for Amazon and IoT startups (TechRepublic)

The key factor will be how competent your organization is in terms of managing and implementing the infrastructure, and what you expect in terms of support. If you need more handholding, Brooks recommends seeking out an option like Hosting.com or going to a professional services firm for help. If you are extremely competent, go to DigitalOcean for $5 servers. If you're somewhere in the middle, one of the big three will probably suit your needs.

Despite a potential expertise gap, Nelson said there is another reason some firms are seeking out the higher-end options in the IaaS market.

"There is a shortage in supply of knowledgeable cloud experts," Nelson said. "Some of the folks that buy managed services realize the shortage and believe that if they spend time training their employees doing this, they won't be able to afford these employees moving forward."

Essentially, those employees could be poached by a vendor or company in a more appealing city, for example.

All in all, the market for IaaS is full of options, and organizations should strongly consider what they want to accomplish with their deployment before engaging with a particular option. Tracking sites like CloudHarmony are good tools for organizations that want to compare certain features.

The good news, Brooks said, is that it's a buyer's market, and cloud resources are more available now than they have ever been.

"Providers need to know that enterprises can, and will, get whatever they want," Brooks said.

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